There are many troubling trends in China these days–the government has recentralized power and is creating a cult of personality around President Xi Jinping, who is expected at an upcoming meeting of the Communist Party to seek to extend his term in office beyond the traditional 10 years. Xi has crushed dissent and arrested or harassed the lawyers who defend them. He is turning China’s Internet into a tool of observing and monitoring the Chinese people, rather than allowing them to develop their own political voices. All this is a throwback to the era of Mao.
But the single deepest trend I see is the proposal for the central government to take small 1 or 2 percent stakes in China’s most innovative companies and appoint party representatives to those boards. That, in effect, gives the party much stronger control over the blossoming private sector.
When I lived in China, government ministries controlled all enterprises. There were no private companies. If the Shoe Ministry, to play a little with the truth, decided that the Chinese people wanted 200 million black shoes, the shoe companies that reported to that ministry would dutifully produce 200 million black shoes–even if no one wanted them.
Over the years, private companies have been allowed to blossom to the point that they now represent about 70 percent of the Chinese economy. They are far more efficient and innovative than the remaining state-owned firms, which are lumbering giants.
The other important thing about the private sector is that many in the West had hoped that if the Communist Party essentially lost control of the economy, it would represent an erosion of its power and an eventual stirring of pluralism.
We at the Overseas Press Club documented how many of the assumptions Western pundits have made about China have turned out wrong. We even produced this book. It turned out to be prescient.
But no one suspected at the time we held a reunion of China correspondents that Xi would go this far and start undermining the country’s private sector. Xi’s vision of Communism is different than any other Chinese leader since perhaps Mao Tse-tung. Xi is turning back the clock to a system of centralized control that is very different from the much more pluralistic model his predecessors pursued. This is truly an historically significant moment if Xi pursues his plans.